Lacey Hamilton hopes to attend the 2018 Winter Olympics in Pyeongchang, South Korea to cheer on the Canadian athletes. To save for the trip, the 22-year-old Mississauga resident drops spare change and $5 bills into a 0.9-litre mason jar that she empties into a savings account when it becomes full.

“I live on a cash diet as much as possible,” she says. “I find that’s the best way for me to not spend my money. If I break a $20 and I see a $5, I keep it. When I get home, I put the fives and the change in my jar.”

She lives at home while pursuing a degree in social work and working four days a week at a department store. After covering groceries, her cellphone bill and other discretionary items, she tries to save $550 a month for retirement, for her first-l home and for emergencies (she has a lot of pets which could mean hefty veterinary bills).

“I wanted to make sure that I lived comfortably and I realized that being financially responsible would allow me to do that.”

Whether you’ve just graduated or are starting out in your career, you want to get on the right track when it comes to your money. To establish yourself as a well-oiled money machine, here are five first steps to financial success.

1. Get clarity

If my misadventures assembling IKEA furniture have taught me anything, it’s that you can’t build something without a plan. And your finances are no different. “What are your goals for your money and your life and what resources — your time and your money — do you have right now?” says Sandi Martin, a fee-for-service financial planner. Determine how much comes in and how much goes out to cover your living expenses. Also, track how much you actually spend by keeping all of your receipts for a few months or adding up your purchases from your online statements. If you’ve got a surplus, high five — allocate that extra money to your goals. If you need help with your money situation, consider having a chat with someone at your bank or an independent financial advisor.

2. Save, save, save

What’s important here is creating a habit that your (wiser, more attractive) older self will thank you for. “It doesn’t matter if it’s $25 or $100 a week,” says Lee Helkie, a certified financial planner with Toronto-based Helkie Financial and Insurance Services. “They’re just going to incrementally increase the money that they’re saving. If they start with $50 a month and next year it’s $100 a month, by the time that they’re in their 30s and 40s, they’ll be comfortable with several hundred a month.” To make saving even easier, set up an automatic transfer of funds, maybe on pay day, into a separate account, maybe a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP).

3. Kick debt in the butt

Paying down debt should be one of your top money priorities. Yes, we have lots of credit options from credit cards to online lenders and we can borrow with historically low interest rates. But that means that our debts can get very out of hand and we don’t want to be screwed when interest rates rise beyond our ability to pay them. Also, if you’re only making minimum payments on your credit cards, you’re going to spend a ton on interest. First, stop using credit now. Next, throw as much money as possible at your debts; so rein in your discretionary spending or create cash flow by taking extra shifts, freelancing, selling things on Facebook Bidding Wars, etc. While attacking the debt with the highest interest rate makes the most mathematical sense, do what motivates you.

4. Hustle for those dollar bills

“If you have financial goals, you need income to support those goals,” Martin says. “Know your worth and increase it when you can. Be able to communicate why you’re worth that much.” If you don’t negotiate your salary, especially at the beginning of a new job, you could stand to lose hundreds of thousands of dollars over your career. Know what your position is worth in your area and have a range in mind. Be ready to explain to your boss how you’ve exceeded expectations or taken on more responsibilities. And when you get that hard-earned raise, don’t just spend it. Consider investing it now. The biggest thing you’ve got going for you is time. Take advantage of the wonderful power of compound interest where your money grows and grows and you get interest on your interest.

5. Protect yourself

Insurance, whether that’s life insurance or critical illness insurance or disability insurance, is a hard sell for young people. But it can be a worthwhile purchase because the earlier you buy it and the healthier you are, the cheaper the monthly premiums will be. At least check if your employee benefit plan has insurance that you can take advantage of. “Insurance doesn’t have to be paying premiums to a company,” Martin says. “But you have to think about in what ways is your ability to live at risk and how you can protect yourself from that risk, whether that’s insurance or your savings.”

Comments

Postmedia is pleased to bring you a new commenting experience. We are committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. We ask you to keep your comments relevant and respectful. Visit our community guidelines for more information.